No pulp fiction here -- the story of Clearwater Paper is clearly fact. The company produces bleached paperboard, consumer tissue products, lumber, and northern bleached softwood (NBSK) pulp. Business is divided into three divisions: Its largest, Pulp and Paperboard manufactures paperboard (used to make packaging for foods, liquids, pharmaceuticals, and toiletries) and pulp -- consumed internally to make paperboard and tissues. A Consumer Products arm produces a private label tissue, largely for grocery chains. Clearwater's Wood Products business provides framing lumber and finishing cedar products for builders. Most of Clearwater sales are made in the US. The company evolved from a spinoff by Potlatch Corp.
Despite the continuing recession, Clearwater's businesses (formerly known as Potlatch Forest Products Corp.) have managed to take root, independent from Potlatch. During 2009, Clearwater's first year as a stand-alone company, sales dipped slightly, driven by a downturn in demand primarily for wood and, to a lesser extent, for paperboard products. Nonetheless, the company was able to take advantage of a $170.6 million alternative fuel mixture tax credit, given by Congress for using a pulp-making byproduct, black liquor, to run its equipment. The credit significantly swelled earnings in 2009, as well as buoyed its cash position. Sales modestly regained momentum in 2010 over 2009, but earnings plummeted 60%, due to higher operating costs and interest expenses, and the expired tax credit.
Clearwater's future lies in its private-label tissue products business, which holds a well established customer base. The company estimates that in 2010 it produced roughly 57% of the total private label tissue goods sold through US groceries. Kroger represents about 11% of Clearwater's consumer products sales. Moreover, it boasts relationships that average 19 years with its top 10 customers.
The company, moreover, is continuing to grow the tissue segment through business acquisitions and capital investments. In late 2010 the company acquired Cellu Tissue Holdings for approximately $530 million. The Georgia-based operation, which makes bathroom tissue, napkins, and other away-from-home paper products, expanded Clearwater's customer-base of consumer retailers, away-from-home distributors, and other third-party converters. The deal results in the integration of 10 manufacturing and converting facility dotting the US, a new $30 million tissue converting facility in Oklahoma, and one in Canada. It also added significantly to Clearwater's indebtedness, increasing it more than three-and-a-half times in 2010 over 2009.
Clearwater's operations are bolstered by a pulp and paperboard mill in Idaho, one of only two solid bleached sulfate (SBS) mills and the only coated SBS mill, in the western US. The mill's capabilities fuel the company's supply of products to the high-end packaging marketplace (folding and liquid cartons, cups and plates, and commercial printing products). Its location serves international customers, too, which represented about 10% of sales in 2010, primarily in the Asia/Pacific region. In addition, Clearwater operates a mill in Arkansas, which supplies customers in the eastern US and the Midwest. – less